Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below: Activity Cost Pool Activity Measure Caring for lawn Square feet of lawn Caring for garden beds–low maintenance Square feet of low maintenance beds Caring for garden beds–high maintenance Square feet of high maintenance beds Travel to jobs Miles Customer billing and service Number of customers The company already has completed its first-stage allocations of costs and has summarized its annual costs and activity as follows: Activity Cost Pool Estimated Overhead Cost Expected Activity Caring for lawn $ 81,800 165,000 square feet of lawn Caring for garden beds–low maintenance $ 34,400 27,000 square feet of low maintenance beds Caring for garden beds–high maintenance $ 56,070 21,000 square feet of high maintenance beds Travel to jobs $ 3,800 18,000 miles Customer billing and service $ 7,900 26 customers Required: Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Activity Rate Caring for lawn per square ft of lawn Caring for garden beds—low maintenance per square ft of low maintenance beds Caring for garden beds—high maintenance per square ft of high maintenance beds Travel to jobs per mile Customer billing and service per customer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below:

Activity Cost Pool	Activity Measure
Caring for lawn	Square feet of lawn
Caring for garden beds–low maintenance	Square feet of low maintenance beds
Caring for garden beds–high maintenance	Square feet of high maintenance beds
Travel to jobs	Miles
Customer billing and service	Number of customers

The company already has completed its first-stage allocations of costs and has summarized its annual costs and activity as follows:

Activity Cost Pool	Estimated Overhead Cost	Expected Activity
Caring for lawn	$	81,800	165,000	square feet of lawn
Caring for garden beds–low maintenance	$	34,400	27,000	square feet of low maintenance beds
Caring for garden beds–high maintenance	$	56,070	21,000	square feet of high maintenance beds
Travel to jobs	$	3,800	18,000	miles
Customer billing and service	$	7,900	26	customers

Required:

Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)

Activity Cost Pool	Activity Rate
Caring for lawn		per square ft of lawn
Caring for garden beds—low maintenance		per square ft of low maintenance beds
Caring for garden beds—high maintenance		per square ft of high maintenance beds
Travel to jobs		per mile
Customer billing and service		per customer

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